Construction engineering firms should be aware of a recent ruling regarding a firm’s duty to disclose housing conditions to purchasers. In the case 21 Kristin Condominium Ass’n v. Pioneer Engineering & Environmental Services, the First District of the Illinois Appellate Court reversed a circuit court’s dismissal of a complaint that alleged negligent misrepresentation on the part of a construction engineering firm for failure to state a cause of action.
In 2006, defendant Pioneer, a construction engineering firm, conducted a Property Condition Assessment (the “Assessment”) for a building being converted to a condominium, where it evaluated the remaining useful life of the building’s roof, elevators, and parking structure. After the Assessment was completed, and the condominium units sold, 21 Kristin Condominium Association was formed. In 2017, over ten years after the Assessment, the Condominium Association, sued Pioneer, alleging it negligently misrepresented the condition of the condominium building owned by the Condominium Association. Specifically, the Condominium Association claimed the building required substantial repairs far sooner than the predicted useful life expectancies made by Pioneer. The circuit court dismissed the Condominium Association’s complaint with prejudice for failure to state a claim, resulting in an appeal to the Appellate Court.
A claim for negligent misrepresentation requires allegations that the defendant was (1) in the business of providing information for guidance in business dealings; (2) providing information that constitutes misrepresentation; and (3) supplying the information for guidance in business dealings.
Despite Pioneer’s argument that it had no duty to the Condominium Association because it did not sell the units, the Appellate Court found Pioneer provided the Assessment to guide prospective purchasers in their business dealings. Pioneer further argued their Assessment was not a misrepresentation because their statements were strictly opinions about the building. Unconvinced, the court likened Pioneer’s representations to those of a real estate agent’s representations of the value of real estate and that Pioneer demonstrated a perspective based on special knowledge. The court therefore found the Assessment included actionable facts and not simply opinions, and reversed the dismissal of the case.
In addition to construction engineering firms, appraisal firms should take notice of the 21 Kristin Condominium decision. Among the many real estate cases the First District relied upon were Duhl v. Nash Realty, Inc. and Kelley v. Carbone, both which involved misrepresentations in appraisal reports. Further, appraisers, like engineers, maintain special knowledge not shared by prospective purchasers, which may result in their statements being deemed fact.
For more information regarding a construction engineering firm’s duty to disclose housing conditions to purchasers, contact the attorneys at Rock Fusco & Connelly, LLC.